If employees are temporarily working remotely abroad, there is often uncertainty as to what rights and obligations apply to them. Companies should bear these things in mind when enabling their employees to work flexibly on the road.
What was hardly or not at all possible in many companies for a long time has become a matter of course in many places since the coronavirus pandemic. More and more employees are working remotely. It's not just working from home in Germany that is in demand, but above all working in another country for short periods of time. According to a Fraunhofer survey conducted in 2022, more than 50 per cent of the 4,000 respondents would like to work abroad in the EU for several weeks a year. More than 30 per cent stated that they would like to work abroad outside Europe on a temporary basis.
So quickly book the next flight and take off? – It's not that simple, neither for companies nor for employees. If the right to work from home is stipulated in the employment contract, this does not mean that employees can work from anywhere in the world. Working remotely abroad always requires well-founded agreements between employees and employers.
Which laws apply? How are working hours regulated? How long will the employee stay abroad and what aspects of labour law, insurance and payroll tax are important? – The following guidelines for companies on remote working abroad provide an initial overview.
1. Binding agreement: Written form for entitlement to work from home
According to current legislation, there is no general right to work from home. If employers wish to allow their employees to do so, special agreements must be made - in writing, as a supplementary agreement to the employment contract. With regard to remote working abroad, these framework conditions should be adapted or extended accordingly.
- How long and how often can employees work from home?
- What working hours apply and how is working time recording regulated?
- What work equipment is provided by the employer? What equipment is provided by the employee?
- What data protection regulations must be complied with?
- How is availability guaranteed?
- In which countries outside Germany can employees work remotely?
- How long are employees allowed to work abroad?
- Under what circumstances must the employee return to Germany early?
- How are social security and health insurance regulated? Do country-specific rules have to be taken into account?
2. Clarify in advance: Right of residence, work permit and labour law abroad
Many companies are generally willing to allow their employees to work abroad. – After all, as an employer, they can score important points in the recruitment process in terms of social benefits. The existing team also benefits. For example, local flexibility and the ability to adapt work to different life situations can lead to increased employee satisfaction and therefore increased productivity.
With regard to the legal basis for remote work abroad, the destination is decisive. Depending on whether the employee wants to work inside or outside the EU, different framework conditions apply.
Remote work within the EU
Freedom of establishment applies in the European Union (EU) and Switzerland. EU citizens enjoy freedom of movement there. They can enter any member state without a visa or work permit and work from there.
With regard to labour law requirements, the following can generally be said: If the employment relationship is German and the employee involved is only working abroad temporarily, German labour law applies. However, companies must check which other national regulations apply and whether these must be applied. For certain areas, the labour law of the remote country may therefore have to be taken into account in addition to German labour law. This includes aspects of technical and/or medical occupational health and safety (see Rome I Regulation).
If the employee is not working remotely abroad at their own request, but has been posted by the employer, the Posting of Workers Directive applies. In exceptional cases, remote work abroad is also considered a posting. Companies should therefore find out whether the employee activity is considered a posting and which national regulations must be observed accordingly.
Working from home abroad outside the EU
There are no binding regulations outside the EU. It always depends on what agreements exist between Germany and the desired target country. As a general rule, employees wishing to work temporarily in non-EU countries require both a residence permit and a work permit. These can usually be easily applied for online.
Some countries, such as Costa Rica or Thailand, have special offers for people who only work digitally. However, the regulations vary greatly. Misconduct – for example, working illegally with a tourist visa – is heavily penalised. Therefore, both employers and employees must inform themselves about the requirements of the non-EU country they have chosen.
Tip: Employees abroad should be registered with the German Foreign Office. There is a database for registering Germans abroad. In an emergency, people can be contacted quickly or families can be informed in the event of an accident.
3. Well covered: social and health insurance when working abroad
As a rule of thumb: within Europe, a stay of up to 30 days is possible without any problems. During this period, no tax or social security conditions need to be checked and/or complied with.
Within the EU, the conflict rules of Art. 11 et seq. of Regulation (EC) 883/04 apply with regard to social security obligations, which stipulate, among other things, that only the legislation of one member state is relevant. The aim is to ensure seamless insurance cover for employees and to avoid double taxation.
In principle, employees are subject to social security contributions in the country in which they work – i.e. in the 'country of activity'. Anyone who works remotely for less than three months within the EU, the European Economic Area or Switzerland remains insured in their home country thanks to the A1 certificate. Since July 2019, employers have had to issue this certificate to every employee travelling to another EU country on business. With an A1 certificate, employees can prove whether the law of the country of posting or the regulations of a foreign country apply to them. In these cases, a German A1 certificate documents that the person working abroad is still subject to German social security law. In this way, simultaneous contribution payments in several member states or switching between social security systems can be avoided. The A1 certificate can now be easily applied for online and is available for download a few days later.
Important: Employees should always carry this certificate with them, as otherwise they may incur high fines if an inspection takes place.
As soon as the remote work abroad – within the EU – lasts longer than three months, social security contributions are due in the respective country of activity. Exception: A company sends employees for a maximum of 24 months to a country in which it also has a permanent registered office.
Germany has concluded social security agreements with some countries outside the EU – such as the USA, Australia, India, Japan and Turkey. These agreements regulate the acquisition of pension entitlements and the payment of pensions in the respective country. No A1 form is required for posting to these countries, but other posting certificates apply.
Health insurance abroad
German insurance cover remains in place for temporary stays abroad without a change of residence. However, it is advisable – especially for stays outside the EU – to take out additional international health insurance. This will cover all costs, including possible return transport costs to Germany. German insurance policies only reimburse treatment costs up to the level of German treatment. Hospitalisation in the USA, for example, is significantly more expensive. The health insurance company will charge the difference accordingly.
4. Check conditions: Tax law when working abroad
There are no standardised regulations within the EU. Tax law issues always depend on the length of the stay abroad and the place of employment. If the 183-day stay in another country is not exceeded and the remuneration continues to be paid by a German company, employees remain liable for tax in Germany (183-day rule). Prerequisite: The employee in question must be resident in Germany.
Germany has also concluded a double taxation agreement with many countries. This regulates in which country taxes are due.
Good to know: If mobile working abroad becomes established and the employee would like to work from there in the long term, those responsible in the company should seek dialogue with the local authorities. If the remote office is used regularly over a long period of time, the remote work location can become a taxable permanent business establishment of the company. This is particularly the case if rooms have been rented.
Individual aspects: Maintaining communication and observing local conditions
In addition to the legal framework, both companies and employees need to clarify individual issues. With flexible working models and management across potentially different time zones, the most important thing is to maintain communication within the team as well as all processes. Virtual team-building activities and the use of modern digital project management and collaboration platforms and modern time recording systems provide valuable services here.
In addition, employees working abroad need to take appropriate security aspects into account, especially when it comes to data security. A secure working environment can also be created abroad with simple options. VPN networks, no work in public networks and the use of monitors with a privacy filter always contribute to increased security when working on the move.
Conclusion: Remote work in other European countries or in countries with which there are special agreements with Germany is much easier to realise. Employers and employees should talk openly about whether these countries should be favoured as a destination country if working from home abroad is desired. In principle, remote working – especially in non-European countries – should be carefully considered. In addition to the legal framework, individual written agreements are required. The location and period of the stay abroad are decisive for labour, social security and tax law aspects.